Opinion
33399.
DECIDED MARCH 16, 1951.
Complaint on contract; from Chatham Superior Court — Judge Atkinson. November 17, 1950.
Brown Shoob, for plaintiff.
Lewis, Wylly Javetz, for defendants.
1. ( a) The principle of estoppel to the effect that, where one of two innocent persons must suffer, he who puts it in the power of a third person to inflict injury is to bear the loss, is not involved under the record of the instant case.
( b) The assignee of an instrument which contains no words of negotiability is chargeable with notice of all defects in the consideration, although he takes it for value and before due.
DECIDED MARCH 16, 1951.
The Mutual Investment Corporation brought suit against Hylan Friedman and Mrs. Bertha S. Friedman, upon an alleged promissory note which is attached to the petition. It is alleged that the defendants signed the instrument sued upon and delivered it to the Flatauer Fixture and Sales Corporation, the payee. The payee indorsed the instrument to the plaintiff. The instrument termed a promissory note upon its face shows that it is somewhat more than an ordinary promissory note. It is a conditional-sales contract wherein the Flatauer Fixture and Sales Corporation sold to the defendants an Electro Freeze Model of a particular type to make frozen custard. The purchase cost was $3250. $750 was paid in cash; leaving the balance, together with finance charges, $2767.50, to be paid in, monthly installments of $153.75 beginning June 10, 1950. The contract was executed on April 17, 1950. These payments were to be made by the defendants "to the seller . . at the office of Mutual Investment Corporation [the plaintiff.]" There are certain fine print stipulations attached to the sales contract on the back. Among them is that the property sold is to remain personal property; that the contract may not be assigned without notice to the defendants; that the defendants should keep it free of lien; to have it insured; that they could not dispose of it without the consent of the seller; time was made the essence of the contract; that there were no stipulations between the parties other than as contained in the contract. There are other fine-print stipulations which we do not think material here to mention. We will mention, however, that in the body of the contract it is stipulated that the property be installed by the seller. We have read the contract carefully and there is no word of negotiability whatsoever in it. There is an indorsement by the Flatauer Fixture and Sales Corporation "with recourse." In the third paragraph of the plaintiff's petition it is alleged that the seller of the property indorsed the bill of sale to the plaintiff for a valuable consideration, and that it is an innocent purchaser of the contract for value. The defendants filed an answer and denied that they owed the plaintiff the amount sued for as alleged in paragraph 2 of the petition. They denied the allegations of paragraph 3 except to the effect as to what the defendants paid the seller and further answered as to paragraph 3 that the instrument sued upon was not a promissory note; that it was not a negotiable instrument and that the plaintiff or any purchaser of the contract would take it subject to all equities and defenses existing between the original parties to the contract. The defendants, in further answering the petition, alleged substantially that they did, on April 17, 1950, purchase from the seller corporation a custard freezing machine which was to be delivered promptly within ten days from the execution of the contract; that shipment of the freezer was not made until about the middle of June, 1950, and that such was a breach of the contract and a violation of the representations made by the seller, the representations having been made by Venno Flatauer, an officer and agent of the seller. The shipment was made by motor lines and the defendants refused to accept it, whereupon the seller requested that the freezer be returned to Savannah and from there to Atlanta for resale. This was done on June 23, 1950. The original bill of lading was also returned to the shipper. The seller of the freezer accepted the machine in Atlanta. The defendants alleged, upon information and belief, that the freezer was thereafter sold to a third person. In another paragraph of the answer it is stated that there has been a total failure of consideration of the contract sued upon by reason of the fact that the property purchased was not delivered to the defendants and that the defendants are entitled to recover the $750 which they paid out.
The plaintiff demurred to the defendants' answer, first on the ground that the answer set up no defense against the plaintiff's petition and, second that the plea and answer of the defendants is a manifest effort to add to and vary by parol the terms of an unambiguous written contract. The court overruled this demurrer and the defendants filed exceptions pendente lite. The case went to a jury. The jury returned a verdict in favor of the defendants. The plaintiff filed a motion for a new trial, which was amended by adding three special grounds. The court overruled this amended motion. On this judgment error is assigned here.
1. (a) We have set out the allegations of the petition, and the contract sued upon attached as an exhibit thereto, and the answer of the defendants, and the demurrer and answer filed by the plaintiff which the court overruled, and to which ruling exceptions pendente lite were filed, and the verdict of the jury in favor of the defendants, all somewhat in detail, in order to get a clear view of the contentions of the parties. It will be noted that the plaintiff sued on the theory and idea that it was a bona fide purchaser for value of a negotiable instrument before maturity. After having the case submitted to a jury and a verdict returned against it the plaintiff in its argument here bases its right to a reversal on the exceptions pendente lite, and the overruling of its motion for a new trial on the theory and principle of law to the effect that the defendants are estopped by the terms of the contract from urging the defenses set up in its answer. So we are not concerned here with the proposition as to whether the instrument sued upon is a negotiable one. That theory seems to have been abandoned by the plaintiff, and we think properly so, because there are no provisions in the contract to indicate that the plaintiff is a bona fide purchaser for value of a negotiable instrument, before maturity. Let us inquire as to whether, in the instant case, the defendants are estopped from urging their defense as appears from the record and whether the court erred in permitting them to do so. It is conceded by the plaintiff that there is no question as to the effects of substantial equities which the defendants could assert against the seller if it were the plaintiff in this case. But the question is whether such a defense is sufficient against the plaintiff under the facts of the instant case. In support of the contentions of the plaintiff counsel cite: 5 C. J. 956; Newsome v. Harrell, 146 Ga. 139 ( 90 S.E. 855), Hart v. Metropolitan Discount Co., 24 Ga. App. 807 ( 102 S.E. 375), Lilly v. Citizens Bank Trust Co., 44 Ga. App. 653 ( 162 S.E. 639), and Williston on Contracts, p. 412, sec. 432, and certain foreign decisions. These authorities deal with the principle of law that if one of two innocent persons must suffer, he who puts it in the power of a third person to inflict injury must bear the loss. That principle of law is not applicable to the facts in the instant case. It will be noted from the contract that the plaintiff had a relation with the seller that impliedly, if not expressly, connected the plaintiff with the seller as not an innocent person on equal terms with the defendants. In fact, it may be inferred from the contract sued upon that the plaintiff had a close relationship if not a partnership in dealings, in such transactions as this record reveals. It is stipulated in the contract itself that the amount of the purchase-price was to be made to the plaintiff, so it appears that there were evidently some prearrangements between the seller and the plaintiff. Indeed, it is clearly inferable that the plaintiff prepared the contract and inserted the fine print therein and, indeed, it may be further clearly discerned that the plaintiff knew at the time the paper was assigned to it that the freezer had not been delivered and installed. Throughout the whole record it is made plainly to appear that the plaintiff and the seller were in close relationship and contact with each other in this transaction. We might add in this connection that the instrument was made with recourse on the seller to the plaintiff.
(b) There are two cases of the Supreme Court which are controlling under the assignments of error here, and which demand an affirmance of the judgment of the court in overruling the demurrer to the answer and in denying the motion for a new trial: First, Third National Bank of Atlanta v. Western Atlantic R. Co., 114 Ga. 890(2) (40 S.E. 1016), which reads as follows: "The assignee of a non-negotiable chose in action takes the same subject to the equities existing between the assignor and the debtor at the time of assignment." Second, Macklin v. Blalock, 133 Ga. 550(1) (66 S.E. 265), which reads as follows: "The endorsee of a due-bill, containing no negotiable words, is chargeable with notice of all defects in the consideration, although he takes it for value and before due."
In the instant case the special grounds of the motion for a new trial are based upon the admission of certain testimony over objections, in support of the defendants' plea and answer and in the charge of the court and the refusal of the court to charge as to its contentions with reference to the liability of the defendants. In admitting the evidence and in the charge and in the refusal to charge, the court was but dealing with the one question as to whether the defendants were estopped from denying liability under the contract sued upon. The contentions shown both by the general grounds and the special grounds are but a reiteration on the part of the plaintiff, as contended in the demurrer to the defendants' answer, that the contentions of the defendants under their plea and answer are insufficient as a matter of law against the claim of the plaintiff.
The court did not err in overruling the demurrer to the answer nor in overruling the amended motion for a new trial.
Judgment affirmed. MacIntyre, P. J., and Townsend, J., concur.